VIENNA, June 30 (Reuters) - The Organisation for Security and Cooperation in Europe said on Monday it had scaled back monitoring operations in eastern Ukraine and frozen further deployments after eight of its observers were held hostage for a month.

The security and rights watchdog's deputy chief monitor, Alexander Hug, said all eight - four set free on Friday and four on Saturday - were unharmed and their release had been unconditional.

But he said the Vienna-based organisation had shrunk its activities in eastern Ukraine, where pro-Russian separatist rebels have been fighting forces of the Kiev government since Russia's annexation of Crimea in March.

The 57-member body sent observers to monitor compliance with a four-way declaration on de-escalation of the crisis agreed in Geneva in April.

"We look forward to the day soon when we can resume our activities in eastern Ukraine to full mission strength, but for that to happen we need a number of improvements," Hug told journalists in Vienna.

"We need weapons to disappear, we need checkpoints to disappear and we need freedom of movement."

Sporadic violence has continued in eastern Ukraine despite a ceasefire declared by Ukrainian President Petro Poroshenko on June 20 to allow for peace talks with the rebels. The ceasefire is due to expire on Monday evening.

Hug said a planned increase in the number of OSCE observers in Ukraine from 250 to 500 was on hold.

"We do not want to put further monitors at risk," he said.

He said that should the security situation improve in the ways he described, "we will be able quickly to increase up to those figures that are included in our mandate". (Reporting by Georgina Prodhan; Editing by Andrew Heavens)

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